The aim of this thesis is broadening the reach of economic research on mergers and industry dynamics, pointing out that mergers are not only done because of firms' needs and do not only create effects in firms' markets. Indeed, dynamics are largely driven by managers and have their impact on employees. We have created some situations were internal functioning and external operating of firms interact. The first chapter claims that if employees in a firm block law reforms that could hurt them, then intervening also in the way how firms should compete in their markets may create positive effects for employees, making them in the end to agree on reforms. Combining reforms creates positive externalites, which if well used can lower resisitance for necessary changes. This is because reforms in the labour and product markets are complementary, and therefore the loosing side of one reform will be the winning side of the other reform. Also, reforms in both markets increase welfare more than a single reform and show thus synergy effects. Moreover, it offers a possible way out of the so called "sclerosis" effect. When frictions in markets are high, interest groups enjoy higher rents and oppose more reforms and thus the markets that need most a reform, are most stuck in a sclerosis. But high frictions in one market make it easier to reform the other market and therefore the sclerosis in one market can cancel out the sclerosis in the other market. In the second chapter we reconsider the market power-effciency trade-off made by competition authorities and stress the importance of both strategic decision making of managers and internal organisation issues after mergers have taken place. The possibility that a merged firm may become more efficient does not mean that these gains will be actually realised as is now widely assumed in the economics literature. A newly merged firm brings together different management teams, which can lead to distrust and conflict and therefore possibly less investment. Our approach facilitates the understanding of why some mergers may fail to become more efficient or even fail to happen. Moreover, it allows us to pin down some pitfalls for the regulator when taking into account efficiency gains in merger decisions. Our model gives also a potential explanation for merger failures. If the managers underestimate the potential conflict, they may end up in an unprofitable merger. The third chapter offers a formal explanation of why some mergers fail and others succeed. We achieve predictions by investigating the interaction between two important aspects of merging: post-merger integration difficulties and the pre-merger gathering of information about obtainable merger synergies. Organisation theorists argue that the a meger success is likely to occur depends upon the process of implementing the merger. But in the economics literature it is a novalty to explain merger failures from the explicit modelling of the post-merger process. Some of our results are intuitively clear as is the fact that less precise information leads to more failures. Less precise information makes it easier to make judgement mistakes and to rely too much on the good news that your partner wants to merge with you. When costs of merging are lower, more merger failures are encountered. For example, during stock market booms when it is easier to find funding for buying up other firms, considerably more failures are indeed encountered. One of our most interesting results finally is that when the punishment of not-integrating is higher, the possibility for failures is reduced. The cultural differences that could derail effective synergy realisation are more carefully attended to because of managers' heightened sensitivity.